With oil at $140 a barrel wholesale gas prices in the UK could fluctuate between about 70 pence per therm in summer and 110 pence in winter over the next few years, the report says.
If Centrica, which owns British Gas, and its competitors pass on the full wholesale increase, their customers would see gas prices rise from about 90 pence to 140 pence per therm - driving average annual gas bills up from around 600 pounds to over 1,000 pounds.
EFFECT ON POWER
Bills will grow if oil prices climb further and the knock-on effect on electricity prices could be similar, the report says, adding that energy costs across Europe will also rise.
Energy suppliers in Britain passed on increases in wholesale costs seen late last year when they hiked retail power and gas prices by around 15 percent in the first quarter of 2008.
Wholesale gas and power prices have kept rising, with oil up nearly 40 percent since the start of the year, and suppliers are expected to announce further steep increases soon.
A report published on Wednesday by Cambridge Energy Research Associates (CERA) also warned that the price of gas - which accounts for a quarter of all the energy used in the European Union - would remain tied to oil as there is no reliable and transparent alternative to oil-indexed gas pricing in Europe.
"This explicit oil and gas link will keep gas prices in mainland Europe high for the foreseeable future," said Shankari Srinivasan, CERA managing director for Europe.
"That will likely cause similar price levels in the United Kingdom due to the country's need to import gas from continental Europe or from sources that have the option to sell it there."
